Who’s Winning the Culture War? Corporate America

Protestors against the Republican tax bill in Westfield, New Jersey, this month.CreditBryan Anselm for The New York Times

At the 1992 Republican National Convention, Pat Buchanan famously declared that American politics had become a “cultural war.” In the years since, social issues and identities have become more important in dividing Democrats from Republicans.

Traditionally, the two parties fought mostly over economics. But now cultural issues like abortion and gun control divide Americans more sharply along regional lines than economic policies. One impact of the rise of the culture war in the 1990s was to reorder the popular coalitions of the parties — for example, by attracting evangelical Protestants to the Republicans while propelling secular voters toward the Democrats. This also redefined their geographic constituencies.

But while it has been fueled by widening divisions over social issues within the American electorate, this regional realignment has left a much larger imprint on the direction of federal economic policy than on the nation’s prevailing cultural zeitgeist.

You might say that the winner of the culture wars is neither Democrats nor Republicans. In legislative terms, American corporations have claimed the biggest victories so far.

The growing sectional divide — the coasts and a handful of Midwestern and Mountain West states vote blue, while voters in the culturally conservative heartland of the South and interior West largely vote red — is magnified by winner-take-all electoral rules that concentrate representation in the hands of local partisan majorities. The Alabama Senate race was an exception, but this largely produces a stable arrangement of “red” and “blue” states and districts that seldom deviate from their normal partisan alignments regardless of the individual candidates seeking office.

On balance, the trend of rising geographic polarization has worked to the advantage of Republicans in both houses of Congress. The Republican Party has captured more seats in culturally conservative red America than it has relinquished in culturally liberal blue America, allowing it to control at least one legislative chamber in all but four years since 1994 after six decades of near-permanent minority status.

Senate Republicans especially benefit from the equal representation of thinly populated states in the nation’s midsection, which once regularly elected moderate Democrats like Ben Nelson of Nebraska, Tim Johnson of South Dakota and Max Baucus of Montana but increasingly favor Republicans in congressional races. Red states now substantially outnumber blue states; in the 2016 election, Donald Trump carried 30 states to Hillary Clinton’s 20 despite his loss in the national popular vote, while the outcome of every Senate race matched the state presidential result — a foreboding sign for the future fortunes of Senate Democrats.

The contemporary geographic coalitions of the parties primarily reflect the nation’s roiling cultural conflicts, but the representatives chosen via today’s electoral map are equally polarized over economic policies — and it is pocketbook issues, not social matters, that dominate the business of Congress. Increasingly unfettered by a declining bloc of dissident party moderates from the Northeast and Pacific Coast, ascendant red-state Republicans have prioritized an ambitious conservative economic agenda encompassing regulatory rollbacks, repeal of the Affordable Care Act and substantial cuts to federal taxes — like the tax bill passed last week — and entitlement programs. Departures from this small-government approach, such as the No Child Left Behind and Medicare Part D programs enacted during the George W. Bush presidency, have fallen out of fashion among post-Tea Party Republican leaders increasingly devoted to the pursuit of ideological purity.

Political analysts often argue that the rise of the culture war has had an acrimonious effect on American politics by expanding the battlefield of partisan disagreement to include a set of policies that provoke moral fervor, like abortion and gay rights, or activate fundamental personal identities such as religion and ethnicity. These divisions, they suggest, do not lend themselves to negotiation and compromise as readily as differences over economics, where horse-trading and difference-splitting are more feasible solutions.

But the growth of cultural conflict has polarized Democratic and Republican politicians on economic issues as well, by providing the two parties with increasingly distinct and insulated electoral constituencies, and bitter debates over health care and tax reform have generated just as much partisan rancor in the current Congress as any other policy domain.

The numerous Republican victories in congressional elections during the past 25 years have not managed to prevent the cultural change that has occurred over the same period, from declining religious observance and increasing support for same-sex marriage to the decriminalization of marijuana and the rise of the Black Lives Matter movement. Cultural conservatism remains essential to defining the Republican Party’s regional base, but its substantive fruits can be found more in the implementation of conservative economic measures than in the repeal of liberal social policies or reversal of leftward social trends.

Despite a 2016 campaign waged largely on cultural themes, the Republican tax bill represents the biggest legislative accomplishment of the current Congress — and, quite possibly, of the entire Trump administration. Though Mr. Trump once presented himself as a populist enemy of Wall Street, and though many corporations have come to adopt liberal positions on issues like immigration, gay rights and affirmative action, big business and wealthy individuals stand to benefit the most from tax cuts approved by congressional majorities elected on the basis of right-of-center cultural views.

That is why the true winner of today’s culture war is corporate America.

David A. Hopkins is an associate professor of political science at Boston College and the author of “Red Fighting Blue: How Geography and Electoral Rules Polarize American Politics.”

Trickle Down? Not Now, and Not for a While at Best (Wonkish)

“You all just got a lot richer,” Trump reportedly told guests at Mar-a-Lago. But Republicans will nonetheless keep insisting that the corporate tax cut that is the main item in the tax bill is really for the benefit of workers. They will be aided in this claim by some recent corporate announcements of bonuses or wage hikes that they attribute to the tax cut.

It’s nonsense, of course. Think of the motivation: lots of companies are raising wages at least a bit in the face of tight labor markets; pretending that it’s because of the tax cut is a cheap way to curry favor with an administration that has no hesitation about using regulatory and antitrust decisions to reward friends and punish enemies. It’s basically Carrier all over: make a Trump-friendly splash by declaring that he persuaded you to save jobs, then lay off lots of workers after the cameras have moved on.

But there’s a larger point here: even if you believe economic analyses that suggest corporate tax cuts are good for wages, it shouldn’t happen right away. Any trickle-down should come about because the tax cuts lead to higher investment, which leads over time to a larger capital stock – and it’s the increase in the capital stock, which may take many years, that leads to the wage rise.

I keep finding it helpful to use a diagram representing the economy corporate tax-cutters imagine we have: a one-sector economy with no monopoly power, open to inflows of foreign capital. (Adding the reality of monopoly rents, noncorporate capital, and nontraded goods all reduce the extent of trickle-down.) This stylized economy looks like Figure 1:

Photo

Photo

Figure 1

The downward-sloping line is the marginal product of capital, which is equal (in this model) to the pre-tax rate of return r. The after-tax return is r(1-t), where t is the tax rate.

Given an initial capital stock K, GDP is the integral of the area under the r curve up to K. Of this, rK goes to pre-tax profits, of which the government takes a share t and the rest goes to after-tax profits. What’s left, the triangle at the top, is wages.

Now suppose the corporate tax rate is cut to a lower level t’. This raises the after-tax rate of return for any given capital stock. The country faces a long-run supply curve for capital; this curve would be horizontal for a small open economy, is surely upward-sloping for the United States. Still, over time the capital stock rises to K’. This, in turn, leads to higher wages:

Photo

The crucial words, however, are “over time.” For a variety of reasons, it would take a number of years for the capital stock to rise to its long-run level. And in the short run, we wouldn’t expect wages to rise at all. Certainly not in the first week after the tax cut!

So if you suspect that these corporate announcements are political theater, not real economic events, the very model's tax-cut enthusiasts like to cite back you up. There will be negligible wage effects of the tax cut in 2018; for the first few years, it’s basically all Mar-a-Lago.

Follow by Email

Subscribe To

Search This Blog

About Me

Because we are all tempted to sacrifice our souls for profit, power, position, prestige, privilege, promotions, popularity, pride, prejudice, politics, prosperity, possessions, or pleasures. So by changing our paradigms, we can become the best versions of ourselves and help make our world a better place to live.

In this blog, we highlight bad practices using examples from current and past events, then we show what the better choices are. This is not to show that good always triumphs over evil, but only to show that better exists and that it's possible for people to operate in the better way. The history of business and how we grew to where we are gives us a perspective that things have been just as bad in the past and eventually got better, so there's still hope that things will cycle to the “better” yet again. We believe this blog is part of pushing the rope of improvement up the hill of progress. If you are dissatisfied with the status quo and looking for a better way to live and work, then bookmark our blog and follow us by email.

________________

BRYAN J. NEVA, SR. is a writer and electronics engineer from San Diego, California. He served as a Hospital Corpsman in the Navy during the Cold War and early War on Terror. He subsequently earned a BSEE and MBA degree from Old Dominion University, and then went on to work in the defense, medical device, and aerospace industries. A convert to Roman Catholicism, Bryan is a strong proponent of Catholic Social Justice and Economic teachings akin to conscientious capitalism and responsible, servant leadership. From his diverse background, he has a counterintuitive view of business management that values people over profits and the needs of the many over the wants of the few.

________________

ALLEN F. LAUDENSLAGER, JR. is a semi-retired writer from Seattle with a business and management background spanning over fifty years. After serving in the Army in Vietnam, he went on to work as an assembly line worker, a foreman, an electrician, a cabinetmaker, a small business owner, an electronics technician, a supervisor, a manager, a senior project manager, and a technical writer. With the knowledge and experience he has gained over a lifetime, he brings an insightful view of life, business, and management in today's global markets.